Rimsky Yuen: New York Convention's Influence on International Arbitration

Keynote Speech on the 60th Anniversary of New York Convention and “One Belt and One Road” Conference

by Mr. Rimsky Yuen, GMB, SC, JP

Distinguished Guests, Fellow Members of the Dispute Resolution Community, Ladies and Gentlemen,

First of all, may I express my gratitude to the organizers, the Shenzhen Court of International Arbitration and the United Nations Commission on International Trade Law Regional Centre for Asia and the Pacific, for inviting me to this conference and for giving me this privilege to share with you a few of my personal observations on the New York Convention.

In terms of human history, 60 years is not a particularly lengthy period. However, in certain contexts, a lot of changes can take place in a period of 60 years. This is certainly the case in the context of international arbitration. In the past 60 years, dramatic changes have taken place in the international arbitration landscape.

If one were to ask what has brought about the changes to the regime of international arbitration, the successful implementation and promotion of the New York Convention is certainly one of the key reasons. Indeed, it has often been said that international arbitration rests on two key pillars, namely, the UNCITRAL Model Law on International Commercial Arbitration 1985 (“UNCITRAL Model Law”) and the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (“New York Convention”). 

These two pillars perform different roles, and each has its own significance in the promotion of international arbitration. As far as the New York Convention is concerned, it has been described as “a universal constitutional charter for the international arbitral process”, and that the terms of the New York Convention “have enabled both national courts and arbitral tribunals to develop durable, effective means for enforcing international arbitration agreements and arbitral awards^[1].

Reasons for the Success of the New York Convention

The New York Convention is not the first international convention dealing with the enforcement of arbitral awards. In the past, there were the Geneva Protocol on Arbitration Clauses of 1923, and also the Geneva Convention on the Execution of Foreign Awards of 1927. Yet, the New York Convention has proved to be far more popular and successful than its predecessors. A few reasons may throw light on the success of the New York Convention.

The first reason, I believe, is the contents of the New York Convention.

Although the title of the convention focuses on the recognition and enforcement of arbitral awards, the New York Convention covers both arbitration agreement and arbitral award. By so doing, the New York Convention tackles issues relating to the two most fundamental aspects of international arbitration, which are: (1) the consensual basis of arbitration which confers jurisdiction on the arbitral tribunal; and (2) the pro-enforcement approach towards arbitral award.

Put slightly differently, enforcement of arbitral award concerns not only the final stage of arbitration. If one looks at Article V of the New York Convention (which sets out the grounds upon which enforcement may be refused), it deals with the most crucial concepts of the entire arbitral process. In other words, by setting out the grounds upon which enforcement may be refused, the New York Convention formulates the fundamental international standard for arbitral process in addition to enforcement of arbitral awards.

Further, not only does the New York Convention focus on the key elements of international arbitration, the language and approach adopted on the whole achieve the aim of striking a balance between clarity, certainty and predictability on the one hand and flexibility and respect for national legal systems on the other. This feature is important in that issues of international arbitration are not dealt with solely at the international level, but also at the national level. Besides, an international instrument such as the New York Convention has to cater for the differences between the legal systems of its signatories, which may be common law systems or continental law systems or a mixture of both. 

The second reason is that the New York Convention fulfils the important expectation of parties to arbitration. Parties who choose arbitration as a means to resolve disputes expect that arbitral awards, in the absence of voluntary compliance, can be effectively enforced. Such an expectation is totally understandable. Unless an arbitral award can be robustly enforced, there is no point in resorting to arbitration. Without the New York Convention and its pro-enforcement approach, this legitimate expectation can hardly be fulfilled. Besides, without the New York Convention which renders enforcement of arbitral award more effective and convenient than court judgments, the international business community would not have prefer arbitration to conventional court litigation.

The third reason is the international efforts that have been made to promote the use of the New York Convention, and also the efforts made to achieve harmonisation in respect of the interpretation of the New York Convention. In this regard, apart from the efforts made by different arbitral institutions such as the International Council for Commercial Arbitration (“ICCA”), the efforts made by the UNCITRAL are highly recommendable. Examples of its efforts include the setting up of the database known as Case Law on UNCITRAL Texts (“CLOUT”) as well as the holding of important conferences such as this one and also the UNCITRAL Asia-Pacific Judicial Summit in the Hong Kong SAR.

The fourth reason, I believe, is the macro development of the world. Globalization and regional integration, together with the booming economy in various Asian jurisdictions including China, have taken the level of international trade to a new height. Such dramatic increases in international or cross-border trade have led to an upsurge of trade disputes, and in turn have led to greater and greater demand for arbitration services. With the implementation of the Belt and Road Initiative and the development among the ASEAN members, the demand for international arbitration will definitely continue.

Extent of Influence: Enforcement under the “One Country, Two Systems” Policy

The influence of the New York Convention is certainly extensive. As of now, close to 160 jurisdictions have become signatories to the New York Convention.

Speaking as a lawyer from the Hong Kong SAR, I can testify that the New York Convention has not only made inter-states enforcement of arbitral awards effective, but has also served as a model for arrangements within one state.

As you would know, the Hong Kong SAR maintains its common law system under the “one country, two systems”. When China resumed the exercise of sovereignty over Hong Kong in 1997, a question arose as to how arbitral award made in the Hong Kong SAR can be enforced in Mainland China and vice versa. We could not invoke the New York Convention because the Hong Kong SAR and Mainland China are parts of the same country. However, as highlighted by Ms. Elise Leung this morning, the New York Convention provided the model upon which the Hong Kong SAR and Mainland China entered into an arrangement in 1999 which effectively deals with the recognition and enforcement of arbitral awards.

Not only are the contents of the arrangement modelled upon the New York Convention, the eventual jurisprudence also develops along the same spirit and rationale as the New York Convention. In this regard, the decision of Chow J in Hong Kong Golden Source Ltd. v New Elegant Investment Ltd, unrep., HCCT 14/2014 (15 September 2014) is a good example.

Indeed, following the successful adoption of the New York Convention as a model for enforcing arbitral award between the Hong Kong SAR and Mainland China, the same approach was adopted in 2013 in an arrangement made between the Hong Kong SAR and the Macao SAR.

The Future

Looking into the future, I am confident that the New York Convention will continue to remain a significant pillar of the international arbitration regime. However, continuous efforts by the international community will have to be made in order to ensure that the success story of the New York Convention will be a sustainable one.

To begin with, continuous efforts to achieve harmonisation of the interpretation of the New York Convention will be most important. In this regard, perhaps a few cases will illustrate this point.

In the Hilmarton case, the French Court of Cassation decided that the arbitral award set aside in Switzerland could be enforced. The reason given is that the decision by a national court annulling the award only extinguished it in that particular national system, and the award “survives” in the international legal order.

On the other hand, in the recent decision of Maximov v NMLK, the English court decided that the award set aside in Russia could not be enforced since it was not enough for the set-aside decision to be wrong or even manifestly wrong. The set-aside decision has to be “so extreme and perverse that they can only be ascribed to bias”.

More recently still, the Court of Final Appeal of the Hong Kong SAR in a judgment delivered on 11th of last month in effect held that an arbitration award set aside in Singapore for want of jurisdiction could not be enforced in the Hong Kong SAR^[2].  

No doubt each of these cases should be understood against the relevant factual and legal background. However, these cases do demonstrate the fact that although the New York Convention has been in place for 60 years, there remain areas where harmonization will be most desirable and that further joint efforts might be necessary to achieve greater harmonization and certainty.

I have earlier mentioned the Belt and Road Initiative. Harmonization is perhaps of particular importance in the context of the Belt and Road Initiative. As you know, the Belt and Road Initiative covers more than 60 countries with very different legal systems and legal culture. In the context of dispute resolution, these 60 odd countries have different dispute resolution regimes and are at different stages in their development of an arbitration culture. Besides, one feature of the Belt and Road Initiative is that the countries are not required to sign any overarching agreement or multilateral convention. Given the openness of the Belt and Road Initiative and the diversities exist among the numerous legal systems involved, international arbitration will surely be one of the best means to resolve disputes arising from Belt and Road projects. However, lack of harmonization among the Belt and Road jurisdictions will be a disincentive to the international business community to resolve disputes through international arbitration. 

The second area, which is related to the first area that I just dealt with, is the need for further efforts in international dialogue as well as capacity building among the international arbitration community. Harmonization cannot possibly be achieved without communication and sharing of experience. Capacity building, on the other hand, facilitates sharing of experiences, which in turn will facilitate harmonization.

The third area concerns the impact of technology. I think we all agree that we are living in a stage of rapid technological changes. Changes often mean challenges. In the context of international arbitration, technological advancements also mean new challenges, both in terms of the arbitral process as well as the enforcement process (if not also the substantive law of arbitration). The key question is how to ensure that the New York Convention will continue to be effective and efficient in a stage of rapid technological advances. The answer is not going to be a walk in the park, but joint efforts of the international community including the good work of the UNCITRAL will help to find the proper solutions.

On this note, it remains for me to wish this conference every success, and may I also take this opportunity to congratulate the organizers of this conference for their good work in the promotion of international arbitration.

Thank You!